MONTEBELLO – The city will continue borrowing from its Redevelopment Agency this year to keep the lights on.

A $9 million loan to the general fund from the city’s Redevelopment Agency last year has been repaid, officials said, but the City Council on Wednesday voted 3-2 to again loan its general fund $8 million this year to keep the city afloat.

“Instead of borrowing money from the bank, we borrow money from ourselves,” Mayor Bill Molinari said Wednesday. “Without these funds, we don’t have a way of meeting our obligations.”

Normally the city would take out short-term tax revenue anticipation notes, or TRANS, to help with cash flow because the bulk of revenue comes in only twice a year, officials said.

But no lenders have issued notes to Montebello because of the country’s overall poor economic conditions and the city’s lack of financial reserves, officials said.

Last year’s loan was repaid with property and sales taxes and various reimbursement funds, which were normally used to pay back TRANS loans in the past, Harkalyan said.

The city hasn’t responded to a June 28 public records request by this newspaper for documentation of the loan repayment. Governments have 10 days to respond to public records requests.

Molinari and Councilmen Frank Gomez and Art Barajas voted Wednesday night to approve an $8 million, no-interest loan from the Community Redevelopment Agency to the general fund for the current fiscal year.

Council members Alberto Perez and Christina Cortez opposed the resolution.

“I can’t see approving a blank check for $8 million without a clear explanation as to where the money will be going, and furthermore a precise plan as to how and when it will be paid back,” Cortez said.

The California Health and Safety Code prohibits using redevelopment funds for “paying for employee or contractual services of any local governmental agency,” other than for redevelopment purposes.

“Redevelopment tax increment funds cannot be used for general operations of an organization, plain and simple. That’s what the law requires,” said John Shirey, executive director of the California Redevelopment Association.

“That doesn’t rule out that an agency could invest funds in its host city government as long as it has terms that are legitimate, such as a set time frame (for repayment), a level of interest that is relative to some other index or cost of funds – it’s not just a loan for cash flow or for supplementing the general fund or a city or county government,” Shirey said.

While city councils in California often double as redevelopment agencies, the two bodies are separate entities, Shirey said.

Montebello has three redevelopment project areas, in the north, middle and south of the city.

Redevelopment agencies have power to declare an area blighted, place it in a specific project area, then collect any increase in property taxes from that point on.

The money is to be used to correct blight in the project area, or for low- to moderate- income housing throughout the city, according to state redevelopment law.

But if day-to-day city services like graffiti removal, road repair and street-lighting maintenance are left unattended because of budget problems, blight could result, according to the city’s loan agreement.

“Whether it’s permitted or not permitted is up for interpretation,” said City Attorney Arnold Alvarez-Glasman.

“By establishing this loan, the goal of eliminating or avoiding blight is being achieved, but the unrestricted use of (CRA) funds for city services is not being established on a permanent basis,” according to the agreement.

The city will pay the CRA loan back quarterly with “revenues received from other governmental agencies as deemed appropriate” by the city administrator and finance director, and any outstanding balances must be made in a balloon payment after 10 years, according to documents.

“From my perspective, the use of those funds are for legitimate redevelopment purposes even though they’re being temporarily loaned to the city,” Alvarez-Glasman said. “These funds are being used to fill the gap of revenues on a short- term basis, and if we didn’t have them, priorities would have to be set in terms of what programs or individuals won’t be getting paid.”

The California Constitution prohibits local governments from incurring debt beyond what they’re able to pay off in one year, without two-thirds voter approval.

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